With graduate school loans accounting for 40% of all student debt, a major focus has been put on the existence of federal programs that allow students to borrow large amounts and then to have a substantial amount of debt eventually forgiven. Graduate students typically owe between $50,000 and $60,000. Medical-school and law-school graduates are amongst the highest borrowers in the United States, graduating with $161,772 and 140,616 in student debt, respectively. As graduate-school enrollment has increased over the past decade, the number of Americans that owe at least $100,000 in student debt has increased to 1.82 million.
Federal Forgiveness for Student Loan Debt
Federal forgiveness programs typically involve public service positions that do not pay the type of salary required to pay off the massive amount of student debt accrued for the degrees these positions require. However, due to the benefit that these positions provide to society, borrowers who work full time for a government agency or nonprofit employer can have their remaining debt forgiven if they make 120 on time monthly payments. A separate law also allows for private-sector workers to have their debt forgiven after approximately 20 years. In addition to these federal forgiveness programs, income based repayment plans are available.
These programs are the subject of major criticism, with some critics claiming that offering “unlimited loans to students, with the prospect of forgiveness, creates a moral hazard by allowing borrowers to amass debts.” Income-based repayment plans have been criticized for requiring tax payers to pick up the tab on school-related debts. Additionally, a number of recent studies show that many people who receive the benefits of this program may actually need them the least such as doctors and lawyers who may end up making six-figure salaries. Despite such criticism, it cannot be denied that these programs offer promise and financial security to those graduate students who choose to pursue a career in the public sector over a potentially higher paying one in the private sector.
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